OpenText Reports Third Quarter Fiscal Year 2015 Financial Results

Apr 28, 2015, 16:01 ET from Open Text Corporation

- Recurring revenue was $383.6 million, up 4%; in constant currency*, up 10%

- Cloud services revenue was $143.8 million, up 12%; in constant currency, up 17%

- Record operating cash flow of $143.1 million and raises quarterly dividend to $0.20

- Total revenue was $447.6 million, up 1%; in constant currency, up 8%

WATERLOO, Ontario, April 28, 2015 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the third quarter ended March 31, 2015.

Financial Highlights for Q3 FY15 with Year Over Year Comparisons (1)


Summary of Quarterly Results







Q3 FY15

Q3 FY14

$ Change

% Change


Revenues: (in millions)






Cloud services

$143.8


$128.4


$15.4


12.0

%


Customer support

184.3


180.3


4.0


2.2

%


Professional service and other

55.5


61.0


(5.5)


(9.0)

%


Total Recurring revenues

$383.6


$369.7


$13.9


3.8

%


License

64.0


73.1


(9.1)


(12.4)

%


Total revenues

$447.6


$442.8


$4.8


1.1

%


Non-GAAP-based operating margin(2)

25.7

%

29.1

%

n/a


(340)


bps

GAAP-based operating margin

11.8

%

15.1

%

n/a


(330)


bps

Non-GAAP-based EPS, diluted (2)

$0.66


$0.84


($0.18)


(21.4)

%


GAAP-based EPS, diluted

$0.22


$0.38


($0.16)


(42.1)

%


Operating cash flows (in millions)

$143.1


$141.4


$1.7


1.2

%


 

Summary of Quarterly Results - Constant Currency



Q3 FY15 re-presented on a constant currency basis

Q3 FY14

$ Change

% Change


FX impact - higher (lower)

Revenues: (in millions)







Cloud services

$149.9


$128.4


$21.5


16.7

%


$

(6.1)


Customer support

198.2


180.3


17.9


9.9

%


(13.9)


Professional service and other

60.1


61.0


(0.9)


(1.5)

%


(4.6)


Total Recurring revenues

$408.2


$369.7


$38.5


10.4

%


$

(24.6)


License

$70.3


73.1


(2.8)


(3.8)%



(6.3)


Total revenues

$478.5


$442.8


$35.7


8.1

%


$

(30.9)


Non-GAAP-based operating margin (2)

26.3

%

29.1

%

n/a


(280)


bps


Non-GAAP-based EPS, diluted (2)

$0.73


$0.84


($0.11)


(13.1)

%


($0.07)


"In Q315, our cloud revenue grew 12%, up 17% in constant currency and we closed 7 iX deals over $1 million, the benefit of which we will see in our future ongoing cloud revenues," said OpenText CEO Mark J. Barrenechea. "Our products and services are resonating with enterprise customers and OpenText is well positioned to lead the digital transformation in the cloud."

Barrenechea further added, "As for our quarterly financial results, we did not meet our full financial objectives. As for revenue, we were affected by foreign exchange and customers transitioning to our cloud; as for profit, we were affected by foreign exchange and unique items in the quarter, such as acquisitions, litigation costs and others, the benefits of which should be seen in future quarters. With that said, I am pleased that our recurring revenues grew by 4%, up 10% in constant currency, and we had record operating cash flows of $143.1 million in the quarter."

"Foreign currency volatility continued to have a significant impact on our results in the quarter and on a year-to-date basis," said John Doolittle, OpenText CFO. "Although we are fighting currency headwinds, we are pleased with our growth in recurring revenues and our operating cash flow performance, attributed to our strong working capital management this quarter. Based on the operating cash performance, our strong liquidity position and our focus on delivering value to shareholders, we have increased our quarterly dividend to $0.20."

*Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.

Business Highlights

  • OpenText buys Actuate Corporation and Informative Graphics Corporation
  • 10 customer transactions over $1 million, 7 cloud contract signings in the OpenText Cloud and 3 on-premises
  • Financial, services and public sector industries saw the most demand
  • Cloud customer successes in the quarter include Hasbro, SleepMed, Roche Diagnostics, KPN and Pillar Administration
  • On-premises customer successes in the quarter include BLS AG, Dover Corp, FACC Operations GmbH, Annenberg Foundation Center, State of Maine Office of Information Technology, Tangerine Bank, Serco and Region of Peel
  • OpenText completes EIM Suite enhancements (SP1) to deliver customer success in the digital-first world
  • OpenText adds analytics for B2B transactions to provide greater supply chain insight
  • OpenText offers a new communications hub for omni-channel interactions in the cloud
  • OpenText announces new contract management system to automate contract processing
  • OpenText announces new compliance and performance capabilities to ensure fast, secure transfer of files
  • OpenText wins patent infringement trial against Box and Carahsoft

Dividend Program Highlights

Cash Dividend - Raised by 16%

As part of our quarterly, non cumulative cash dividend program the Board declared on April 27, 2015 a sixteen percent increase in its quarterly cash dividend from $0.1725 to $0.20 per Common Share. The record date for this dividend is May 29, 2015 and the payment date is June 19, 2015. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board of Directors.

Summary of Quarterly Results



Q3 FY15

Q2 FY15

Q3 FY14

% Change

(Q3 FY15 vs Q2 FY15)


% Change

(Q3 FY15 vs Q3 FY14)


Revenue (million)

$447.6


$467.8


$442.8


(4.3)

%


1.1

%


GAAP-based gross margin

65.7

%

68.1

%

67.3

%

(240)


bps

(160)


bps

GAAP-based operating margin

11.8

%

23.6

%

15.1

%

(1,180)


bps

(330)


bps

GAAP-based EPS, diluted

$0.22


$0.60


$0.38


(63.3)

%


(42.1)

%


Non-GAAP-based gross margin (2)

70.8

%

72.2

%

71.3

%

(140)


bps

(50)


bps

Non-GAAP-based operating margin (2)

25.7

%

32.8

%

29.1

%

(710)


bps

(340)


bps

Non-GAAP-based EPS, diluted (2)

$0.66


$0.97


$0.84


(32.0)

%


(21.4)

%


 

Summary of Year to Date Results



Q3 FY15 YTD

Q3 FY14 YTD

% Change


Revenue (million)

$1,369.2


$1,130.7


21.1

%


GAAP-based gross margin

67.1

%

68.3

%

(120)


bps

GAAP-based operating margin

19.4

%

17.1

%

230


bps

GAAP-based EPS, diluted

$1.35


$1.08


25.0

%


Non-GAAP-based gross margin (2)

71.5

%

73.0

%

(150)


bps

Non-GAAP-based operating margin (2)

31.0

%

30.1

%

90


bps

Non-GAAP-based EPS, diluted (2)

$2.59


$2.32


11.6

%


Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 15 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/events.cfm.

A replay of the call will be available beginning April 28, 2015 at 7:00 p.m. ET through 11:59 p.m. on May 12, 2015 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 1469 followed by the number sign.

Please see below note (2) for a reconciliation of non-U.S. GAAP-based financial measures used in this press release, to U.S. GAAP-based financial measures.

About OpenText

OpenText is the largest independent software provider of Enterprise Information Management (EIM). For more information please visit www.opentext.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release, including statements about the focus of Open Text Corporation ("OpenText" or "the Company") in Fiscal 2015 on growth in earnings and cash flows, creating value through investments in broader Enterprise Information Management (EIM) capabilities, distribution, the Company's presence in the cloud and in growth markets, its financial condition, results of operations and earnings, declaration of quarterly dividends, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the EIM marketplace; and (ix) the Company's financial condition and capital requirements. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the possibility that the Company may be unable to meet its future reporting requirements under the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder; (iii) the risks associated with bringing new products and services to market; (iv) fluctuations in currency exchange rates; (v) delays in the purchasing decisions of the Company's customers; (vi) the competition the Company faces in its industry and/or marketplace; (vii) the final determination of litigation, tax audits and other legal proceedings; (viii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (ix) the continuous commitment of the Company's customers; and (x) demand for the Company's products. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

For more information, please contact:

United States:

Greg Secord
Vice President, Investor Relations
Open Text Corporation
San Francisco: 415-963-0825
gsecord@opentext.com

Canada:

Sonya Mehan
Senior Manager, Investor Relations
Open Text Corporation
Waterloo: 519-888-7111 ext. 2446
smehan@opentext.com

Copyright ©2015 Open Text Corporation. OpenText is a trademark or registered trademark of Open Text SA and/or Open Text ULC. The list of trademarks is not exhaustive of other trademarks, registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text SA or other respective owners. All rights reserved. For more information, visit: http://www.opentext.com/2/global/site-copyright.html_SKU.


OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share data)



March 31, 2015


June 30, 2014


(unaudited)



ASSETS




Cash and cash equivalents

$

613,177



$

427,890


Short-term investments

19,029




Accounts receivable trade, net of allowance for doubtful accounts of $6,818 as of March 31, 2015 and $4,727 as of June 30, 2014

251,826



292,929


Income taxes recoverable

20,543



24,648


Prepaid expenses and other current assets

53,563



42,053


Deferred tax assets

35,936



28,215


Total current assets

994,074



815,735


Property and equipment

155,129



142,261


Goodwill

2,155,243



1,963,557


Acquired intangible assets

730,673



725,318


Deferred tax assets

149,570



156,712


Other assets

84,223



52,041


Deferred charges

41,043



52,376


Long-term income taxes recoverable

8,587



10,638


Total assets

$

4,318,542



$

3,918,638


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

212,397



$

231,954


Current portion of long-term debt

15,802



62,582


Deferred revenues

364,728



332,664


Income taxes payable

4,529



31,630


Deferred tax liabilities

2,220



1,053


Total current liabilities

599,676



659,883


Long-term liabilities:




Accrued liabilities

30,802



41,999


Deferred credits

14,089



17,529


Pension liability

64,000



60,300


Long-term debt

1,582,000



1,256,750


Deferred revenues

20,042



17,248


Long-term income taxes payable

163,232



162,131


Deferred tax liabilities

65,659



60,631


Total long-term liabilities

1,939,824



1,616,588


Shareholders' equity:




Share capital




122,207,636 and 121,758,432 Common Shares issued and outstanding at March 31, 2015 and June 30, 2014, respectively; Authorized Common Shares: unlimited

806,532



792,834


Additional paid-in capital

120,246



112,398


Accumulated other comprehensive income

43,720



39,449


Retained earnings

818,666



716,317


Treasury stock, at cost (407,725 shares at March 31, 2015 and 763,278 at June 30, 2014, respectively)

(10,680)



(19,132)


Total OpenText shareholders' equity

1,778,484



1,641,866


Non-controlling interests

558



301


Total shareholders' equity

1,779,042



1,642,167


Total liabilities and shareholders' equity

$

4,318,542



$

3,918,638


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of U.S. dollars, except share and per share data)

(unaudited)



Three Months Ended March 31,


Nine Months Ended March 31,


2015


2014


2015


2014

Revenues:








License

$

63,958



$

73,083



$

198,397



$

209,553


Cloud services

143,822



128,400



445,097



212,178


Customer support

184,335



180,290



547,707



523,155


Professional service and other

55,462



60,981



178,008



185,835


Total revenues

447,577



442,754



1,369,209



1,130,721


Cost of revenues:








License

3,014



3,527



9,514



9,867


Cloud services

59,989



49,464



174,959



79,692


Customer support

24,092



25,206



71,252



71,785


Professional service and other

44,330



49,218



136,332



145,898


Amortization of acquired technology-based intangible assets

22,136



17,147



58,548



51,712


Total cost of revenues

153,561



144,562



450,605



358,954


Gross profit

294,016



298,192



918,604



771,767


Operating expenses:








Research and development

53,222



47,199



144,134



129,332


Sales and marketing

95,787



93,700



265,896



244,403


General and administrative

45,722



39,336



121,327



101,037


Depreciation

12,809



10,527



37,516



23,883


Amortization of acquired customer-based intangible assets

28,250



24,679



79,498



54,388


Special charges

5,622



15,902



4,032



25,901


Total operating expenses

241,412



231,343



652,403



578,944


Income from operations

52,604



66,849



266,201



192,823


Other income (expense), net

(9,550)



1,652



(28,737)



2,838


Interest and other related expense, net

(16,872)



(9,734)



(36,426)



(17,159)


Income before income taxes

26,182



58,767



201,038



178,502


Provision for (recovery of) income taxes

(309)



12,971



35,401



48,576


Net income for the period

$

26,491



$

45,796



$

165,637



$

129,926


Net (income) loss attributable to non-controlling interests

119



88



(114)



88


Net income attributable to OpenText

$

26,610



$

45,884



$

165,523



$

130,014


Earnings per share—basic attributable to OpenText

$

0.22



$

0.38



$

1.36



$

1.09


Earnings per share—diluted attributable to OpenText

$

0.22



$

0.38



$

1.35



$

1.08


Weighted average number of Common Shares outstanding—basic

122,158



120,873



122,042



119,048


Weighted average number of Common Shares outstanding—diluted

123,054



122,100



122,980



120,031


Dividends declared per Common Share

$

0.1725



$

0.1500



$

0.5175



$

0.4500


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended March 31,


Nine Months Ended March 31,


2015


2014


2015


2014

Net income for the period

$

26,491



$

45,796



$

165,637



$

129,926


Other comprehensive income—net of tax:








Net foreign currency translation adjustments

9,280



(1,087)



17,626



(733)


Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss)

(2,801)



(1,604)



(7,017)



(1,517)


Loss reclassified into net income

2,488



1,237



3,485



2,410


Actuarial gain (loss) relating to defined benefit pension plans:








Actuarial gain (loss)

(3,052)



(1,808)



(10,107)



(781)


Amortization of actuarial loss into net income

75



74



280



220


Unrealized gain on short-term investments

4





4




Unrealized gain on marketable securities (Actuate)





1,906




Release of unrealized gain on marketable securities (Actuate)

(1,906)





(1,906)




Total other comprehensive income (loss), net, for the period

4,088



(3,188)



4,271



(401)


Total comprehensive income

30,579



42,608



169,908



129,525


Comprehensive income attributable to non-controlling interests

119



88



(114)



88


Total comprehensive income attributable to OpenText

$

30,698



$

42,696



$

169,794



$

129,613


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended March 31,


Nine Months Ended March 31,


2015


2014


2015


2014

Cash flows from operating activities:








Net income for the period

$

26,491



$

45,796



$

165,637



$

129,926


Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation and amortization of intangible assets

63,195



52,353



175,562



129,983


Share-based compensation expense

6,562



4,418



15,940



15,707


Excess tax benefits on share-based compensation expense

16



(594)



(1,611)



(1,675)


Pension expense

1,180



1,174



3,602



1,964


Amortization of debt issuance costs

1,135



1,016



3,410



2,060


Amortization of deferred charges and credits

2,630



2,706



7,893



8,640


Loss on sale and write down of property and equipment

118





118



15


Deferred taxes

(5,256)



(1,005)



(4,037)



(4,203)


Release of unrealized gain on marketable securities to income

(3,098)





(3,098)




Write off of unamortized debt issuance costs

2,919





2,919




Changes in operating assets and liabilities:








Accounts receivable

36,311



9,953



76,560



19,129


Prepaid expenses and other current assets

(3,304)



(14,464)



(4,001)



(18,625)


Income taxes

(10,245)



3,169



1,354



5,578


Deferred charges and credits



1,382





9,870


Accounts payable and accrued liabilities

(16,421)



(22,032)



(53,747)



(32,878)


Deferred revenue

39,450



60,156



6,705



20,022


Other assets

1,428



(2,614)



(1,992)



(3,300)


Net cash provided by operating activities

143,111



141,414



391,214



282,213


Cash flows from investing activities:








Additions of property and equipment

(12,325)



(8,215)



(60,586)



(28,443)


Proceeds from maturity of short-term investments

7,092





7,092




Purchase of patents







(192)


Purchase of Actuate Corporation, net of cash acquired

(291,768)





(291,768)




Purchase of Informative Graphics Corporation, net of cash acquired

(35,180)





(35,180)




Purchase of GXS Group, Inc., net of cash acquired



(1,077,671)





(1,077,671)


Purchase of Cordys Holding B.V., net of cash acquired







(30,588)


Purchase of a division of Spicer Corporation





(222)




Purchase consideration for prior period acquisitions

(147)



(222)



(590)



(665)


Other investing activities

(482)



(1,573)



(8,915)



(2,547)


Net cash used in investing activities

(332,810)



(1,087,681)



(390,169)



(1,140,106)


Cash flows from financing activities:








Excess tax benefits on share-based compensation expense

(16)



594



1,611



1,675


Proceeds from issuance of Common Shares

3,689



14,289



12,827



19,718


Equity issuance costs



(144)





(144)


Purchase of Treasury Stock

(1,251)



(1,275)



(1,251)



(1,275)


Proceeds from long-term debt

800,000



800,000



800,000



800,000


Repayment of long-term debt

(493,655)



(13,412)



(520,485)



(32,499)


Debt issuance costs

(16,673)



(15,759)



(18,076)



(16,032)


Payments of dividends to shareholders

(21,075)



(18,224)



(63,174)



(53,692)


Net cash used in financing activities

271,019



766,069



211,452



717,751


Foreign exchange gain (loss) on cash held in foreign currencies

(10,953)



915



(27,210)



5,768


Increase (decrease) in cash and cash equivalents during the period

70,367



(179,283)



185,287



(134,374)


Cash and cash equivalents at beginning of the period

542,810



515,354



427,890



470,445


Cash and cash equivalents at end of the period

$

613,177



$

336,071



$

613,177



$

336,071


 

Notes

(1)

All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.



(2)

Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (non-GAAP).These non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.




The Company uses these non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain non-GAAP measures defined below.




Non-GAAP-based net income and non-GAAP-based EPS are calculated as net income or net income per share on a diluted basis, excluding, the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges, all net of tax. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets. Non-GAAP-based gross margin is calculated as non-GAAP-based gross profit expressed as a percentage of revenue. Non-GAAP-based income from operations is calculated as income from operations, excluding, the amortization of acquired intangible assets, special charges (recoveries), and share-based compensation. Non-GAAP-based operating margin is calculated as non-GAAP-based income from operations expressed as a percentage of revenue.




The Company's management believes that the presentation, of the above defined non-GAAP financial measures, provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management and is based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports. In the course of such evaluation and for the purpose of making operating decisions, the Company's management excludes certain items from its analysis, including amortization of acquired intangible assets, special charges (recoveries), share-based compensation, other income (expense), and the taxation impact of these items. These items are excluded based upon the manner in which management evaluates the business of the Company and are not excluded in the sense that they may be used under U.S. GAAP.




The Company believes the provision of supplemental non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary non-GAAP financial measures that exclude certain items from the presentation of its financial results in this press release.




The following charts provide (unaudited) reconciliations of U.S. GAAP-based financial measures to non-U.S. GAAP-based financial measures for the following periods presented:

 


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2015.

(In thousands except for per share amounts)


Three Months Ended March 31, 2015


GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues







Cloud services

$

59,989



$

(182)


(1)

$

59,807



Customer support

24,092



(224)


(1)

23,868



Professional service and other

44,330



(316)


(1)

44,014



Amortization of acquired technology-based intangible assets

22,136



(22,136)


(2)



GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)

294,016


65.7

%

22,858


(3)

316,874


70.8

%

Operating expenses







Research and development

53,222



(654)


(1)

52,568



Sales and marketing

95,787



(1,919)


(1)

93,868



General and administrative

45,722



(3,267)


(1)

42,455



Amortization of acquired customer-based intangible assets

28,250



(28,250)


(2)



Special charges (recoveries)

5,622



(5,622)


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

52,604


11.8

%

62,570


(5)

115,174


25.7

%

Other income (expense), net

(9,550)



9,550


(6)



Provision for (recovery of) income taxes

(309)



18,122


(7)

17,813



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

26,610



53,998


(8)

80,608



GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

0.22



$

0.44


(8)

$

0.66





(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax recovery rate of approximately 1% and a non-GAAP-based tax rate of 18%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as movements in FIN48 and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 18%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

 


Three Months Ended March 31, 2015



Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

80,608


$

0.66


Less:



Amortization

50,386


0.41


Share-based compensation

6,562


0.05


Special charges (recoveries)

5,622


0.05


Other (income) expense, net

9,550


0.08


GAAP-based provision for (recovery of) income taxes

(309)



Non-GAAP based provision for income taxes

(17,813)


(0.15)


GAAP-based net income, attributable to OpenText

$

26,610


$

0.22


 


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the nine months ended March 31, 2015.

(In thousands except for per share amounts)


Nine Months Ended March 31, 2015


GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues







Cloud services

$

174,959



$

(581)


(1)

$

174,378



Customer support

71,252



(632)


(1)

70,620



Professional service and other

136,332



(914)


(1)

135,418



Amortization of acquired technology-based intangible assets

58,548



(58,548)


(2)



GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)

918,604


67.1

%

60,675


(3)

979,279


71.5

%

Operating expenses







Research and development

144,134



(1,831)


(1)

142,303



Sales and marketing

265,896



(6,587)


(1)

259,309



General and administrative

121,327



(5,395)


(1)

115,932



Amortization of acquired customer-based intangible assets

79,498



(79,498)


(2)



Special charges (recoveries)

4,032



(4,032)


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

266,201


19.4

%

158,018


(5)

424,219


31.0

%

Other income (expense), net

(28,737)



28,737


(6)



Provision for (recovery of) income taxes

35,401



34,288


(7)

69,689



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

165,523



152,467


(8)

317,990



GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

1.35



$

1.24


(8)

$

2.59





(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as movements in FIN48 and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 18%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

     


Nine Months Ended March 31, 2015



Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

317,990


$

2.59


Less:



Amortization

138,046


1.12


Share-based compensation

15,940


0.13


Special charges (recoveries)

4,032


0.03


Other (income) expense, net

28,737


0.23


GAAP-based provision for (recovery of) income taxes

35,401


0.29


Non-GAAP based provision for income taxes

(69,689)


(0.56)


GAAP-based net income, attributable to OpenText

$

165,523


$

1.35


 


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended December 31, 2014.

(In thousands except for per share amounts)


Three Months Ended December 31, 2014


GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues







Cloud services

$

56,974



$

(186)


(1)

$

56,788



Customer support

23,942



(234)


(1)

23,708



Professional service and other

46,641



(335)


(1)

46,306



Amortization of acquired technology-based intangible assets

18,206



(18,206)


(2)



GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)

318,670


68.1

%

18,961


(3)

337,631


72.2

%

Operating expenses







Research and development

46,170



(614)


(1)

45,556



Sales and marketing

90,010



(2,594)


(1)

87,416



General and administrative

39,849



(966)


(1)

38,883



Amortization of acquired customer-based intangible assets

25,364



(25,364)


(2)



Special charges (recoveries)

(5,759)



5,759


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

110,571


23.6

%

42,740


(5)

153,311


32.8

%

Other income (expense), net

(9,314)



9,314


(6)



Provision for (recovery of) income taxes

18,308



7,559


(7)

25,867



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

74,287



44,495


(8)

118,782



GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

0.60



$

0.37


(8)

$

0.97





(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 20% and a non-GAAP-based tax rate of 18%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as movements in FIN48 and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 18%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

 


Three Months Ended December 31, 2014



Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

118,782


$

0.97


Less:



Amortization

43,570


0.35


Share-based compensation

4,929


0.04


Special charges (recoveries)

(5,759)


(0.05)


Other (income) expense, net

9,314


0.08


GAAP-based provision for (recovery of) income taxes

18,308


0.15


Non-GAAP based provision for income taxes

(25,867)


(0.20)


GAAP-based net income, attributable to OpenText

$

74,287


$

0.60


 


Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the three months ended March 31, 2014.

(In thousands except for per share amounts)


Three Months Ended March 31, 2014


GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues:







Cloud services

$

49,464



$

(167)


(1)

$

49,297



Customer support

25,206



(138)


(1)

25,068



Professional service and other

49,218



(245)


(1)

48,973



Amortization of acquired technology-based intangible assets

17,147



(17,147)


(2)



GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)

298,192


67.3

%

17,697


(3)

315,889


71.3

%

Operating expenses







Research and development

47,199



(384)


(1)

46,815



Sales and marketing

93,700



(1,926)


(1)

91,774



General and administrative

39,336



(1,558)


(1)

37,778



Amortization of acquired customer-based intangible assets

24,679



(24,679)


(2)



Special charges (recoveries)

15,902



(15,902)


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

66,849


15.1

%

62,146


(5)

128,995


29.1

%

Other income (expense), net

1,652



(1,652)


(6)



Provision for (recovery of) income taxes

12,971



3,814


(7)

16,785



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

45,884



56,680


(8)

102,564



GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

0.38



$

0.46


(8)

$

0.84





(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 22% and a non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as movements in FIN48 and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

 


Three Months Ended March 31, 2014



Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

102,564


$

0.84


Less:



Amortization

41,826


0.34


Share-based compensation

4,418


0.04


Special charges (recoveries)

15,902


0.13


Other (income) expense, net

(1,652)


(0.01)


GAAP-based provision for (recovery of) income taxes

12,971


0.11


Non-GAAP based provision for income taxes

(16,785)


(0.15)


GAAP-based net income, attributable to OpenText

$

45,884


$

0.38


 


Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the nine months ended March 31, 2014.

(In thousands except for per share amounts)


Nine Months Ended March 31, 2014


GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues:







Cloud services

$

79,692



$

(145)


(1)

$

79,547



Customer support

71,785



(547)


(1)

71,238



Professional service and other

145,898



(743)


(1)

145,155



Amortization of acquired technology-based intangible assets

51,712



(51,712)


(2)



GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)

771,767


68.3

%

53,147


(3)

824,914


73.0

%

Operating expenses







Research and development

129,332



(1,906)


(1)

127,426



Sales and marketing

244,403



(6,200)


(1)

238,203



General and administrative

101,037



(6,166)


(1)

94,871



Amortization of acquired customer-based intangible assets

54,388



(54,388)


(2)



Special charges (recoveries)

25,901



(25,901)


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

192,823


17.1

%

147,708


(5)

340,531


30.1

%

Other income (expense), net

2,838



(2,838)


(6)



Provision for (recovery of) income taxes

48,576



(3,216)


(7)

45,360



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

130,014



148,086


(8)

278,100



GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

1.08



$

1.24


(8)

$

2.32





(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 27% and a non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as movements in FIN48 and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

 


Nine Months Ended March 31, 2014



Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

278,100


$

2.32


Less:



Amortization

106,100


0.88


Share-based compensation

15,707


0.13


Special charges (recoveries)

25,901


0.22


Other (income) expense, net

(2,838)


(0.02)


GAAP-based provision for (recovery of) income taxes

48,576


0.40


Non-GAAP based provision for income taxes

(45,360)


(0.37)


GAAP-based net income, attributable to OpenText

$

130,014


$

1.08


 

(3)

The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and nine months ended March 31, 2015 and 2014:




Three Months Ended
March 31, 2015


Three Months Ended
March 31, 2014

Currencies

% of Revenue

% of Expenses*


% of Revenue

% of Expenses*

EURO

23

%

14

%


27

%

17

%

GBP

8

%

8

%


9

%

10

%

CAD

5

%

12

%


4

%

14

%

USD

52

%

49

%


48

%

42

%

Other

12

%

17

%


12

%

17

%

Total

100

%

100

%


100

%

100

%

 


Nine Months Ended
March 31, 2015


Nine Months Ended
March 31, 2014

Currencies

% of Revenue

% of Expenses*


% of Revenue

% of Expenses*

EURO

24

%

15

%


28

%

18

%

GBP

9

%

8

%


8

%

9

%

CAD

5

%

12

%


5

%

16

%

USD

50

%

47

%


48

%

41

%

Other

12

%

18

%


11

%

16

%

Total

100

%

100

%


100

%

100

%

*Expenses include all cost of revenues and operating expenses included within the Condensed Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and special charges

(4) Currency impact on selected GAAP-based and non-GAAP-based measures for the nine months ended March 31, 2015*

The following tables illustrate the impact of foreign exchange rates (FX) on selected GAAP-based and non-GAAP-based measures for the respective periods:

YTD Highlights - Constant Currency basis






Q3 FY15 YTD re-presented on a constant currency basis

Q3 FY14 YTD

$ Change

% Change


FX impact - higher (lower)

Revenues: (in millions)







Cloud services

453.4


212.2


$

241.2


113.7

%


(8.4)


Customer support

565.9


523.2


42.7


8.2

%


(18.2)


Professional service and other

184.4


185.8


(1.4)


(0.8)

%


(6.4)


Total Recurring revenues

$

1,203.8


$

921.2


$

282.5


30.7

%


$

(33.0)


License

207.5


209.5


(2.0)


(1.0)

%


($9.1)


Total revenues

$

1,411.3


$

1,130.7


$

280.5


24.8

%


$

(42.1)


Non-GAAP-based operating margin (2)

31.0

%

30.1

%

n/a


90


bps


Non-GAAP-based EPS, diluted (2)

$2.68


$2.32


$

0.36


15.5

%


$

(0.09)


 

* Individual line items may be adjusted by non-material amounts to enable totals to align to published financial statements.

 

SOURCE Open Text Corporation



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